Last month, it was revealed Morgan Stanley (NYSE: MS) is doling out $7 billion to acquire Eaton Vance (NYSE: EV), a company with deep roots in the actively managed mutual funds category. That could be a sign of things to come, according to some market observers.
While it doesn’t have immediate or direct implications for actively managed exchange traded funds, Morgan Stanley’s $7 billion acquisition of mutual fund manager Eaton Vance underscores how active management is still desirable on multiple fronts.
Eaton Vance has some experience with actively managed exchange traded funds, previously listing some products under the NextShares label.
“Having faced the COVID-19 pandemic on top of years of pressure from shrinking fees and shifting investor preferences toward the industry’s giants, money managers are debating whether to stick it out on their own or enter the deal market in search of scale or complementary products, Wall Street investment bankers, analysts and other experts say,” according to S&P Global Market Intelligence.
Consolidation Ahead?
With actively managed exchange traded funds grabbing a larger slice of the industry pie, the time could be right for more consolidation.
Advisors and investors continue warming to actively managed exchange traded funds around the world. The data agree.
“Active ETFs and ETPs gathered net inflows of US$8.24 billion during September, bringing year-to-date net inflows to a record US$51.48 billion which is significantly more than the US$29.41 billion gathered through Q3 2019 as well as the US$42.10 billion gathered in all of 2019,” according to ETFGI, a London-based ETF research firm.
Issuers believe the new active ETFs offers the best of both traditional active equity and ETF worlds, highlighting value add through the alpha potential of active management, access to a growing array of active equity strategies, the advantages of the more efficient ETF structure, and the additional choice of structures that meet investor needs.
“The stars seem to be lining up for more [deals],” said Mark Timperman, a Managing Director and Head of Asset Management investment banking at Hovde Group said in an interview. “After having been through a real scare with the COVID cycle, when there was another big market correction, people realized that it’s time to think about where the industry ends up in five years.”
For more on active strategies, visit our Active ETFs Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
